As a homeowner, there comes a point when you may desire a change, seeking to relocate to a different neighbourhood, upgrade to a more spacious home, or downsize. A common query in such scenarios is: ‘Can I buy a house before selling my current one?’ In short, the answer is ‘Yes.’ However, the process entails more intricacies than a simple ‘Yes’ or ‘No.’ This article will demystify the concept of buying before selling, touching on key considerations and potential strategies.
One of the primary financial considerations when buying a new home before selling your current one is managing two mortgages. Unless you have sufficient capital to outrightly purchase your new home, you may need to juggle two mortgage payments, which can be financially burdensome.
Lenders consider your current mortgage when determining your eligibility for a new loan. If your financial capacity appears strained with the addition of a new mortgage, it could limit the amount you’re eligible to borrow.
Bridging loans can be a viable solution to the above issue. These are short-term loans intended to ‘bridge’ the gap between the sale of your old property and the purchase of a new one. They offer homeowners the flexibility to act fast when they find their ideal property. However, they can come with high-interest rates and fees, making them a less desirable option if your current house doesn’t sell quickly.
The prevailing market conditions can greatly influence your decision to buy before selling. In a seller’s market, where demand outweighs supply, homes can sell fast. This could allow you to purchase your new home with the assurance that your current property will not linger on the market.
Conversely, in a buyer’s market, where supply exceeds demand, selling your current home might take longer. Buying a new property before selling in such a market could result in long-term financial strain.
Strategies to Mitigate Risks
Incorporating a contingency clause into your purchase agreement can be a safety net. This clause conditions the purchase of your new home on the sale of your current property. While this strategy offers protection, not all sellers may be open to this condition, especially in a competitive market.
Renting Your Current Home
If your existing property doesn’t sell quickly, consider renting it out to cover the mortgage costs. This strategy can provide you with a steady stream of income, reducing financial stress. However, becoming a landlord comes with its own set of responsibilities and legal obligations.
Sale and Leaseback
Another option is a sale and leaseback, which allows you to sell your current home and then rent it back from the new owner. This strategy provides you with the proceeds from the sale to purchase your new home, while also allowing you to remain in your current property until you’re ready to move.
The Role of Estate Agents
In the complex process of buying a new home while selling your existing one, estate agents can play a pivotal role.
Navigating the Market
Online estate agents like Sold bring a deep understanding of the housing market to the table. They are privy to the nuances of both buyer’s and seller’s markets, making them a vital asset for homeowners navigating this challenging path. Their expertise can help you understand the best time to buy or sell, potentially making your transactions smoother and more lucrative.
Valuation and Pricing
When it comes to selling your current home, an estate agent can provide an accurate valuation based on the property’s location, condition, size, and the state of the market. The agent will ensure your property is priced competitively to attract potential buyers without underselling it.
Marketing and Negotiations
Estate agents will market your property, utilising a mix of online listings, social media, and their network of potential buyers. They manage viewings, liaise with potential buyers, and negotiate on your behalf, ensuring you achieve the best possible sale price.
When purchasing a new property, estate agents use their negotiating skills to secure favourable terms. They can identify potential issues during viewings and raise these during negotiations, often saving you significant sums of money.
Legalities and Paperwork
The process of selling and buying a home involves significant legal paperwork. Estate agents can guide you through this often confusing process, ensuring all paperwork is correctly filled out and submitted on time. They can also liaise with conveyancers or solicitors as necessary.
The decision to buy a house before selling your current one is certainly feasible, but it requires careful planning and risk assessment. A deep understanding of your financial status, the housing market, and potential risk-mitigation strategies are essential to navigate this route successfully. Always consider seeking advice from financial advisors and real estate experts to make the most informed decision.